Asset sales

[xor]

Originally Posted by Brutus

Yeah, nah, still doesn't cover what I want to know. Which is why its better to sell the assets rather than borrow the same amount? Assuming they're actually profitable enough to cover the repayments?

SOE's are generally inefficient beasts when compared with private enterprise.

[Phrack]

It's probably not as simplistic as this but this is my vague assumption. Do let me know if it is close or way off, then I might be half interested in reading into it a bit more.

You borrow money, you must pay interest. If you aren't earning enough to successfully pay off interest + capital, you're pretty well screwed.

You sell assets, save borrowing, you pay less interest, have less debt.

The amount you're saving from clearing/not creating a possible 5billion of debt, Im pretty sure would be larger than the amount of revenue lost from selling these assets.

I haven't read anything, I don't actually really even know what they are selling. Just my assumption of why they are selling things.

[Deadmeat]

[quote=Brutus]Yeah, nah, still doesn't cover what I want to know. Which is why its better to sell the assets rather than borrow the same amount? Assuming they're actually profitable enough to cover the repayments?

hmmm, so they're challenging Labour to prove its bad. All I've seen from them can basically be summed up as "Asset sales bad, Labour good"
Can I take it then that they're not profitable enough to justify borrowing the money instead?

It's a bit of a two faced line, since nat are currently borrowing $x billion to pay the bills. If the companies weren't profitable they couldn't be sold since shareholders wouldn't buy shares knowing they are going to take a loss.

This is the best argument I've seen yet for the sales, assuming of course that the majority of the shares do end up in NZ hands.

It's a big assumption and there is nothing to guarantee the "majority of shares" stay in NZ hands (beyond whatever period a loyalty scheme is run for).

The glib argument against asset sales is something like; privatisation increases prices for consumers due to shareholders requiring higher ROI than governments. foreign ownership sends money offshore rather than recirculating in the nz economy. (i think, but i might be wrong) some of the assets to be sold are giving a ROI over the cost of servicing debt.

for: freeing up capital to pay for non profit assets (schools etc), getting people involved in the stockmarket, pr boost if they make their surplus deadline

[pxpx]

Borrowing money will increase public debt, which is not the end of the world, NZ isnt too bad when compared with other countries AFAIK.

http://en.wikipedia.org/wiki/List_of...by_public_debt (sort by % of gdp).

I think one of the more pressing issues for the economy is private debt, come about by a lack of savings, and one could argue, a lack of options for alternative investment outside of property. By moving these government assets to a mixed ownership model, they'rev providing an oppurtunity to the private person to diversify their investments, not just put everything in the family home.

Investing in a long term strategic asset with a proven track record? That sounds like a pretty good hedge outside of kiwisaver/nz super.

I'm no economist and that's just how I understand things. But like you said, Labour havent really provided anything aside from cliched rebuttals like "selling the family silver" and "but the dividends!!" The dividends might make borrowing more money affordable, but the government borrowing more money isnt really the major issue is it?

[Saladin]

Originally Posted by xor

SOE's are generally inefficient beasts when compared with private enterprise.

I dunno about that, those fascists were pretty good about making the trains run on time I hear.

[CCS]

Just gonna crib from Mr Oil again:

[xor]

Originally Posted by Saladin

I dunno about that, those fascists were pretty good about making the trains run on time I hear.

You're about as cool as Megan Woods, GG.

[Dazza]

The fact we're shareholders isn't important, what is important is we are stakeholders.

And yes governments are generally better and looking after the long-term well being of it citizens than private enterprise, at least their primary objective isn't to create as much profit as possible.

Why make any of the shares voting shares? or make voting privileges only for NZ natural persons and only 1 vote irregardless of how many shares you have.

[fixed_truth]

Originally Posted by pxpx

Borrowing money will increase public debt, which is not the end of the world, NZ isnt too bad when compared with other countries AFAIK.

Yep.

The IMF says that calls into question how much reducing the Government's deficit will do to bring down the country's overall indebtness.

In its annual review of the New Zealand economy, the IMF says cutting government debt is usually the key for an orderly escape from high debt levels.

It says New Zealand, with its high private debt, and low government borrowings, casts doubt on that theory.

http://www.radionz.co.nz/news/nation...ebt-key-for-nz


Also, BERL brings some interesting research to the debate

BERL economist Ganesh Nana said the 'mixed-ownership model' (MoM) policy, as it stood, would worsen the Government's deficit in the short term compared to a no-changes baseline scenario. That was because the Government would lose some of the dividend stream it received from the assets partially sold.

It would then take a number of years for new assets such as schools or broadband infrastructure to affect the Government's tax take positively enough to cover that lost dividend stream.

In the long-term the Government's annual deficit would return to the baseline scenario, but the Government's net worth, total assets and debt ratio would be worse than the baseline, Nana said.

http://www.interest.co.nz/news/59386...nce-new-assets

[blynk]

PM rejects loyalty scheme claims

So basically Key/English are saying that the cost on incentivising the sales won't be that high, because people may pay more for the incentive.

To me it sounds like you could either buy a product for $90 at one shop, but if you go to another shop you can can get 10%, but the price is $100.

So now you will get less shares for your money, only to get the bonus shares afterwards, to make it the same as if there were no incentive.

[fixed_truth]

We've got the Treasury saying a loyalty scheme could cost $250 million to $500 million. And Parliament's finance and expenditure committee suggesting about $360 million. http://www.nzherald.co.nz/politics/n...ectid=10821712

I'm trying not to be too cynical but this looks a lot like everyone having to subsidise this wealthy groups shares purchase? But for what benefit?

[Diirk]

Originally Posted by blynk

PM rejects loyalty scheme claims

So basically Key/English are saying that the cost on incentivising the sales won't be that high, because people may pay more for the incentive.

To me it sounds like you could either buy a product for $90 at one shop, but if you go to another shop you can can get 10%, but the price is $100.

So now you will get less shares for your money, only to get the bonus shares afterwards, to make it the same as if there were no incentive.

He seems to be suggesting that the government will make moneey, because instead of selling shares for eg $100 each, they'll be able to sell them for say $105... and everyone will be happy to pay that price because of the 10% bonus (including institutions like investment funds etc) despite the fact that going by his earlier estimates most purchasers won't get the bonus at all. So I'm not sure why they'd want to pay more.

Going to be interesting to see how the bonus is implementeed... if you sell them, can the new owner get the bonus later on? If not, won't that tank the share price a bit ? Would be pretty embarassing to see what should be a good investment do a Facebook.

[Ab]

Originally Posted by fixed_truth

We've got the Treasury saying a loyalty scheme could cost $250 million to $500 million.

If Treasury said that the sun was going to come up tomorrow I'd start stocking up on candles and torch batteries.

[blynk]

Originally Posted by Ab

If Treasury said that the sun was going to come up tomorrow I'd start stocking up on candles and torch batteries.

It's more than what we have heard from National though.

They seem happy to come up with figures when Labour proposes something (like the 26 maternity change), but not so happy to realise their own figures.

[chubby]

because you can say 'fiscally neutral' all you like... but the figures make it obvious that national believe in upwards redistribution and nothing else.

[Ab]

I'm sure they believe in gravity too.

[chubby]

not all of them.

[fixed_truth]

Excellent article on how financially irresponsible these sales really are:
http://www.nzherald.co.nz/business/n...ectid=10829989

The case for selling our SOE's looks flimsy at best and a travesty from the perspective of young people and those other sectors of society who stand to lose from the transactions. This is likely to be at least half that population. If this Government truly has the interests of all New Zealanders at heart it is time to admit it has made a mistake.

[fixed_truth]

Interesting move by Key to delay the sales until next year.

[blynk]

It may mean there is enough time to get the signatures required for a referendum before the first sales happen.
I wonder where they are at with that.

[Brutus]

250k according to the radio this morning, they need 380k to initiate a referendum.

[A Corpse]

...which will waste a few million more dollars and then be ignored by the government, as they are entitled to do.

Total wankfest.

[fixed_truth]

Well the issue is definitely losing them a lot of voters. I would think that IF a pre-sales referendum showed an overwhelming lack of support then by ignoring this they'd lose a lot more.

[Ab]

Originally Posted by fixed_truth

Well the issue is definitely losing them a lot of voters.

I can't see any indication of that.

[Dazza]

I really don't like how they're devaluing all the assets and projected incomes for the power companies to make them more "attractive" for potential investors. Sounds too much like Argentina to me

[[Malks] Pixie]

Originally Posted by Ab

I can't see any indication of that.

Truth. Of course thats mostly because the first indication we'll get of any loss of voters will be at the next election.

[I am obvious troll - see me be obvious]

Pixie

[Ab]

Yeah but even the latest Roy Morgan shows National's support barely changed since the election.

Then again, maybe that's more a reflection of the standard of their opposition.

[Juju]

Originally Posted by fixed_truth

Well the issue is definitely losing them a lot of voters. I would think that IF a pre-sales referendum showed an overwhelming lack of support then by ignoring this they'd lose a lot more.

Despite the fact that asset sales were one of the mostly widely known policies under the National umbrella at election time?

Tui ad.

[fixed_truth]

Originally Posted by Ab

I can't see any indication of that.

Afaik swing voters haven't been surveyed on why they shifted, but I think that the fact partial asset sales are so unpopular does indicate that's the reason.

Originally Posted by Juju

Despite the fact that asset sales were one of the mostly widely known policies under the National umbrella at election time?

Tui ad.

National ignoring a clear majority referendum is a different context. Duh.

[mr selfdestruct]

So, Mighty River Power due to hit the stock market. I personally wouldn't buy any, they seem like a bit of a mess to me. Genesis Energy on the other hand I would DEFINITELY buy shares in when they're available.

[ZoSo]

David Shearer: Spineless chickenshit

[fixed_truth]

Govt told Solid Energy to borrow

Former Solid Energy chairman John Palmer will be grilled today by Opposition MPs on whether pressure from the Government for the company to borrow more contributed to its near-collapse last month.

It will be interesting to see how this plays out. It smells like dodgy dealings from English.